Query Desk

This is a limited access to the Query Desk, where we share some of the Queries we have answered. These are not recommendations, but a casual chat between a client and the research analyst team.

Client 28, Oct 19

Subject: Ion Exchange and Hindustan Foods

Dear Amit

What is your take on Hindustan Foods and Ion Exchange? both are small-cap growth stocks with RK Damani and Jhunhunwala as investors respectively 

Dmart has already started sourcing FMCG products form HFL.

Please advise


Anil Goel

Admin Reply 05, Nov 19

Hi there 


Hindustan Foods is really scaling up well. It has added manufacturing units Left, right and centre. And, it's definitely a good short-term trend to be into. But, one big thing we have learnt in this space, the contract manufacturing guys do not make much money over a longer horizon. 


Let me explain to you how. Ideally, we want to be invested into companies, where we are making the money now, when we are invested and getting the full benefit of cash flows my company is making now. But, the problem in contract manufacturing companies, as an owner I can only make money when I will actually sell my business. Because as an owner, so much of the company’s capital is invested in the operations, be it through working capital and manufacturing facilities.I do believe, this is a little confusing statement. 


The idea here is that as a contract manufacturer, my scale has to be extremely large thus the capexes are done every year for the company. The Free cash flow continues to stay negative for a long time. In a bad time, the large customers (MNCs in this case) will put pressure on the contract manufacturers to take working capital risk (be it through increasing inventories, increasing receivable cycle and stretching the payables), and in fear to not lose a contract with such large marquee customers, the contract manufacturers will take this short term pain, which eventually turns into a longer term pain. 


I believe any value creation will only take when you will be able to place more cash flows with the existing shareholders. This is already visible in some of our own MNC FMCG players, where the growth in Cash Flows was larger than the growth in revenue growth, which led to much higher market caps.



Let me give you one more iteration of how the marquee clients of Contract manufacturers create more value. I am comparing Apple and Hon Hai Precision Tech (Foxconn), the largest contract manufacturer for Apple products.


Apple created more value from one of its successful product- Iphone 5, than its manufacturer Foxconn. Iphone 5 was launched in 2012, the picture represents a timeframe from 2012-present. (Yellow is Apple, Blue is Foxconn)


We can definitely play short term opportunities here, but not the larger trends.


Unfortunately,  I am not tracking ION Exchange very closely, but as far as i can recall, the large growth in the first half was driven by its EPC segment, which is a pure-play project business.


Client 24, Oct 19

Subject: momentum vs multibagger for me

Please list difference between momentum vs multibagger. 

I see atleast 4 times a day my portfolio during market hours. What suits me ? Is it momentum or multibagger.

Kindly eleoborate what kind of peole should opt momentum, multibagger. Which suits whom better. 

How come both can give adantage?


Admin Reply 19, Nov 19

Hi Sir,

These are Past Performance of 3 Products till 31 October 2019

1) PMS Since Inception (This is SEBI Data & Net of Fees)

2) Advisory since 2013 till march 2016, Then Combined it with Multibagger Portfolio.

3) Multibagger Advisory from April 2016

4) Momentum since Inception in December 2017


All 3 of our Products are Fantastic, Momentum, Multibagger & PMS.. I had written already which product is for whom last week.. 

Client 07, Oct 19

Subject: What % Allocation should be towards Equities

Hi amit,

I have three questions, I am 45 & make about 1.2 Lakh a month, i run a tiles retail store & have stocks worth 7lakh in the stallion portfolio, i save 3-4 lakhs a year net of home expenses. I am try to cut expenses and save more to invest in stallion to reach my goal of 2 crores when i am 60 year old. Can i add more Capital now, is this a bull market? 


Which Companies in the Portfolio will Create most Wealth in next 5 Years?


What is the biggest Risk in Stallion? 

Admin Reply 02, Nov 19

Hi Sir,

Rule Number 1 = Focus on Making more money than on Saving.. There is way too many things people writing & say about saving but very less is written about making more money..  Indians have nailed it on the Saving money side but unfortunately we have been weak in the Making money side.. Every Person you speak to will give you tips on saving money, A Penny Saved is JUST A PENNY SAVED, Making More is our Goal.. 


Invested Capital * Returns * Duration of Investment * Understanding of Stallion = Returns Earned using Stallion.. (Understanding of Stallion is Important)


I believe You will reach 5-7 Crores easily if you focus on Increasing Invested Capital & Understanding of Stallion Philosophy.. The Consistent Returns is my Job & your Duration of 15 years is great.. 


Question 2 - If this is a Bull Market?

Jesse Livermore Said - "Nobody should be puzzled as to whether a market is a bull or a bear market after it fairly starts. The trend is evident to a man who has an open mind and reasonably clear sight, for it is never wise for a speculator to fit his facts to his theories." -


The Screen Tells me we have started a Swatch Bharat Bull Market as i said in my Monthly Newsletter last Month, I believe a lot of People will focus on Low Quality Value Stocks (Media Ofcourse will Keep Calling the Trend Expensive) but for next 2 Years the First Filter has to be Corporate Governance & then Growth!


Question 3 - I Believe Stallion has a very sound & Great strategy but in Stock market the Biggest enemy of is human nature i.e. Our Own Emotions. We Must have an Open Mind & be Flexible & be 100% Focussed on the game!


Client 06, Oct 19

Subject: Any thought on IRCTC

Hi Sirji,

I have seen stallion giving rational and its view on almost every active stock. Would like to know about IRCTC and whats your thought after its listing.

Admin Reply 07, Oct 19

Hi Sir 


Let me give a title here. Please stick around, its going to be a long one, trust me but its worth it!

A Forced, Profitable, Scalable Monopoly!


Lets start with some context; before we delve in for the main Game!


IRCTC started around 1998-99, with a view to serve Railways in Online ticket servicing and Catering to the premier trains. 


It has broadly 4 businesses

  1. Catering

  2. Packaged Bottles

  3. Travel & Tourism

  4. Internet Ticketing.


Segment (FY19)

% of Revenues % of PBT
Catering 52% 39%
Packaged Bottles 9% 7%
Travel & Tourism 23% 17%
Internet Ticketing 12% 38%
Total 1875 crores 420 crores


Now, why is suddenly everyone gung-ho about the IPO?

Its offered at about 2.7x Market cap to sales, 19x earnings, very steady business, large opportunity size - actually no, we have the deepest penetration for railways in the world, so whats the bloody change ? Why so high Grey market premiums and such large subscriptions?


Remember November 2016, the Demonetization bullet hit our country !

  • - Hard currency was wiped out in the country, Government wanted to encourage people with cash-less transactions. This is the time when “Paytm Kar” jingle went viral. This is also the time people have booked the longest distance train in First Class segment through physical Ticket Windows, to stuff the cash and get it back as refunds after ticket cancellations, a kick-ass way to do Black-to-White, but a very small quantum. 
  • - Govt. ordered Indian Railways to waive off service charges on Long Journey Rail tickets booked online so as to encourage cashless transactions in hard-currency starved country. 


Where was this waive-off burden taken ?

  • - You guessed it right, its IRCTC! In one shot, you take away 500+ crores revenues from IRCTC and reimburse it with paltry 80 crores annually. IRCTC took this heavy-weight losses for 2 years. Though, the topline got compensated with 2017 Monopolizing Catering policy. I do believe this was just to lessen the burden of Ticketing revenues losses, can this catering monopoly reverse, yes it can ! (only after the main game is active and steady, read on…)


Now the main game!

  • - Indian Railways announced that it would allow IRCTC to collect service charges again from 1st September, 2019. So, now 500+ crores lost after demonetization will come back to Topline, actually a little more. Its because, people booking tickets online have gone up 40-50% in the last 2 years. 20 crore tickets were booked online annually before demonetization and about 30 crores tickets will be booked online in FY20, and believe me its a large change. Though this impact will be offset by decline in service charges. (From 40 Rs./ticket to 30 Rs./ticket for AC Coaches and from 20 Rs./ticket to 15 Rs./ticket for Non-AC Tickets) But still a very big big Delta!


Lets understand it through the numbers, to give you a better perspective.


1.How many tickets will be sold through the IRCTC platform?

  • - We expect anywhere between 30-32 crore tickets annually.


2.What is the average realization we expect from service charge per ticket?

  • - We expect anywhere between 21-22 Rs. per ticket. Why this figure though? Its because the average realization before demonetization was about 28 Rs. per ticket, and now you index it with the new range, it comes to 21-22 Rupees. 


3.Lets do the Math!

  • - What is the topline I am adding here? About 630-700 crores to the topline. Now, lets recollect how much Internet ticketing revenues were booked for the year, it was about 230-240 crores.

  • - So now, you have 235 crores (existing topline) + 650 crores (new topline, because of service charges) - 88 crores (i spoke something about reimbursements, that goes off now) ~ 800 crores. (jump of almost 250% huge huge )

  • - We all care about the bottomline, right. How it flows to the bottom line? Split the 650 crores in two parts, one is IRCTC and another is Indian Railways (325 crores each). Now deduct 88 crores from this 325 crores. You get about 237 crores additional profit before tax, and now deduct the tax which will be 25%. You added about 180 crores to the bottomline (there are no additional major costs for selling more tickets from the same ticketing platform, right, thats what we love about these businesses), with just one signature on a revised notification. (this is how it happens in railways)


4. What is in it for us?

  • - Now suddenly the 19x earnings which was being offered by the company, turns to lucrative  11x earnings. 

  • - Additional free cash flows for sure. Free cash flows of 490 crores were reported in FY19. Now we expect these FREE cashflows to go upto 700-720 crores for FY21. And one more cherry, it has about ~1100 crores cash. 

  • - Here there's an opportunity to get a business at a very attractive valuation of 5.8% free cash flow/Enterprise Value Yield.  


Now the Sad Part !

  • - Are we buying the IPO, most probably no! Par Itna attractive hai…
  • - Grey Markets are already pricing in a premium of 210-250 rs per share, so the listing is expected around 530-580 rs per share.(450-480 tak aaya, we can get in for cool 30%)
  • - One thing we have to understand here, Indian Railways has historically been a bad allocator of capital. This great cashflows of IRCTC business would be used for commoditized businesses like running a water plant, corrupt catering service, being a travel operator. And now lately, operating a private train on the Indian Tracks, its going to be a challenge!
  • - Rail Official signatures on Important notifications is a dangerous business for IRCTC. (One shot revenue of 500 crores gone and another shot its back! Also catering policy 2017, which was to reduce the revenue loss be reversed, another big shot on Top-line)
  • - We expect it to trade around 18-22 times earnings, so effectively the market cap will be around 8000-10000 crores upon listing, and there will be a stretch in valuations post listing, it can go till 750-800 also, who knows? We’ll touch it, if the valuations and growth is good for us.

Client 04, Oct 19

Subject: PSU disinvestment going forward

Hi Amit,

this government is pushing psu strategic sales in a very bold manner. i want to know, how do you see, this step bringing about changes in indian economy. 

apart from the government meeting disinvestment target and then reinvesting in social or infra sector, how this privatization spree will alter the course for sectors and existing private players. like in the case of CONCOR, once the privatization of CONCOR is done, then railways will not have any proxy in the market, they have to treat other players at par and then we will see the real opening up of freight sector. Similarly many sectors that were open up previously were monopolized by PSUs as they get preferential treatment from ministeries and are often selected/nominated for huge projects. now there will be open tender and the market will determine who will survive and who will not.

in light of this do you think there could be some sectors which will get positive development.

thanks and regards

Admin Reply 02, Nov 19

Hi Sir,

History Suggest Big Money is Made on PSU Divestments - 


BALCO(government Aluminium Company) was taken over by Vedanta for 550 Crores in 2001, today BALCO's valuation is about 14000 Crores and Dividend is more than 1500 Crores.


Vedanta took over Hindustan Zinc at 600-700 Crores 18 year back, today the Valuation of Hindustan Zinc is 1 Lakh crores and Dividend is 12000 Crores. Hindustan Zinc has already given more than 50,000 Crores as dividend.


I am looking at these things closely though the odds, We need to see the New Promoter because the Runway for these stocks is 10-20 Years if sold as most of them are monopolies!

Client 01, Oct 19

Subject: Downside Risk to the Market - Exit Plan

Hi Amit,

Below are my observations of what is hapenning in India. Would love to hear your comments on what your views are on the below points. 

I read the article https://www.indiatoday.in/india/story/india-housing-mess-projects-stalled-1575926-2019-08-01 and it seems pretty disturbing. This is just one part of the country, there are many such examples across India. Most of them who have invested in these houses would be paying EMI along with the rent on thier current accomodation. This is could be one of the reasons why we see demand crunch in auto and other sectors in the market.

Houses have become unafforable in India with affordable houses advertised by leading real estate developers (godrej prop, shobha) to be in the price range of 1-1.5 cr. Many of their inventories are also unsold due to the purchasing power of a comman man. Salaries have not risen at par with the rising rates of daily used items.

With de-monetisation and GST - many small scale companies had to shut shop thereby causing job loses for people emplyed from rural india who returned back home and do not have money to feed. Therby reducing the dmand for Parle-G biscuits soaps etc in rural India. This is inturn leading to a cycle.


Coming to the main question I wanted to ask.. Do you think the realty mess is going to take India down? What do you think is a strong support at NIFTY levels. Do you think there is a possibility of 2008 like crash arising? I know its difficult to predict, but how can Nirmala stand holding the NIFTY line up like that (loved the image you used for the Nirmala PUT blog :D) but in the event if such a thing happens how would we ensure we either liquidate our portfolio with minimal loss or will high quality survive in such a scenario- I doubt it would? We would need to have a plan.

Not being too pessimistic but we need to be sure we protect our capital.

Admin Reply 02, Nov 19

Hi Sir,

Global GDP Growth has been 2% For last 10 years, but you had a Google who has Created a Consumer monopoly & Grew at 25%.. We have to bet on business who are not fighting anymore.. Lets take an Example of Google, it used to fight with a lot of players in the competative software product business.. What google did is build Andriod & now instead of competiting with all other software product companies, he partnered with them to create a Monopoly.. 


Look at Google Maps, Uber, OLa, Zomato are all build on it. Basically the New world of Business will take over the Old World of Business & thats where large wealth Creation will happen.. If you see what Ola, Uber, Zomato have created is basically they have created Entreprenuers (Delivery Boys & Drivers) on their Ecosystem & Rebuilding this ecosystem is Impossible again.. 


My Job is not see that the World will grow at 1.5 or 2.5%, it doesnt matter much, Our Job is to make a Portfolio of entreprenuers who are creating Great Business model. Growing Fast & Understand the game well!

Client 27, Sep 19

Subject: Goodyear review

hi Amit,

Goodyear isa market leader in the domestic farm equipment tyre space and possess one of the best B/S amongst its peers.With a decline in domestic rubber prices, as well as, upgradation in earning estimates .Can we accumulate it on decline for long term wealth creation.

Admin Reply 02, Nov 19

Hi Sir,

Good Year is a Superb Bet on Tyre Story in India but they are not showing any greed for Growth.. Absolutely Fantastic B/S but You need P&L Growth also.. I See India Moving from 2.5 Trillion to 5 Trillion$,

Rule Number 1 - Avoid Permanant Loss of Capital 

Rule NumbEr 2 - Get Decent Returns on Our Investments.. 


I like GoodYear but FOr now i have better Options to Play with.. Look at HDFC Bank, If i could i would increase my Weights from 7-8% to 10% here, If you see this is now at 4x P/B & ROE will be 20% Next Quarter Onwards.. Theorically a 20% ROE HDFC BAnk should be Valued at 5x Book, Gives us a Superb Upside optionality, Though if i am wrong & ROE Remains at 18% we will still compound at 18%.. 

Client 22, Aug 19

Subject: Auto stocks long term

Amit, your views on auto stocks mainly on PV major Maruti , Premium bike major Eicher Motors and CV stocks M&M, Ashok leyland

Admin Reply 16, Sep 19

Hi Sir,

India is a 2.5 Trillion$ Economy, We havent even seen what rich means.. There are only 21 cars in India for every 1000 People, Its 800 cars per1000 people in the United States, Even in afganisthan is 50 Cars for every 1000 People, In srilanka its 70 Cars for 1000 people, In China its 180 Cars for every 1000 People.. 


I am a Strong Believer of Auto as a Sector in India, Look at Companies which are not disrupted due to EV like Tyres etc or Consumer Monopolies like Eicher or Maruti... Ofcourse the Rule of the Game is changes with New technology but for now i am SuperBullish on Autoanciallaries for 10 years which are not affected by EV Change... I believe India will have 2-4x More Car in 2029 than what we have today.. 


The Total Numbers of Car's Sold in India is 40 Lakhs v/s 2.5 Crores in China! I


The current Slowdown is due to 2 things

1) Economic Slowdown

2) Ola/Uber gaining Share as young India wants to see Videos on Youtube & Instagram while they travel (JIO has indirectly disrupted Auto Industry, HAHA)


The 2nd Point cannot be changed but with economy growth coming back in India in 2-3 years, people will spend more money on Cars, Real Estate as Income improves!


Client 20, Aug 19

Subject: Growth & Undervalue

Hi Amit,

Your strategy towards growth stocks is fantastic but I want to understand the concept of undervalued stocks. I think both kind of stocks can make huge money. So why are you focusing only on growth stocks. 

Please correct me if I am wrong. Also Gold is going in new territory so there r 2 big companies in this Mannapuram and Muthoot. 

What is the rationale behind selecting Muthoot ? Why not Mannapuram?

Admin Reply 16, Sep 19

Hi Sir,

I can speak about Growth Stocks, Trends, Scale up, New Products, Customers, Capital Allocation etc etc for 1 month continously non stop now because this is all i think about & know ..

Is the Any Stock you know which has created Sustainable Wealth Without Growth?

Is there Any Stock Which has Growth without Customers loving Them?

Is there any Stock which didnt launch new Products for Growth?

The biggest failures are because of bad capital Allocation.. Kodak Camera had the world first Digital camera but they were scared that launched that would finish their Films business.. A Market leader for 100 Years went bankrupt, Look at Nokia they had 53% Global Market share in mobile phones & they didnt spend 5-6 Billion & lost on a 1.5 Trillion Dollar Market cap Opportunity of Cell Phones!


Fallings Stocks are not Undervalued, Rising stocks are not overvalued... I am looking at Monopolies with large opportunity, Superb Management & Great FreeCash Slow, I hate Competitions!

Client 18, Aug 19

Subject: Want to create wealth in next 10-15 years

Hi Amit Sir,

I'm 21 years old Chemical Engineer working in a Oil marketing PSU, I currently earn around 20 LPA and have started investing into equity 1 years ago. I spend 6-8 hrs daily studying the market. Few months ago I came across your advisory and after reading query desk, watching your videos, doing study of investment philosophy, looking at the past track record, I decided to take subscription of stallion asset. I have learnt a lot from your portfolio & Risk management systems, Style of Investing and have developed a Great conviction. I have invested all of my money as well as few lakhs taken from parents into our portfolio. At this point of time I can take higher risk and My goal is to become financially independent in next 10-15 years. My calculations show that with 10 Lakh upfront investment and monthly investment of 1.25 lakhs with 12% annual increment in investment, if we earn 26% CAGR in next 10 years (After few bull and bear market cycles), I will be having 10 Crore net worth in 10 years and 45 crore in 15 years (Effect of Compounding). Is this feasible ? Is there any Catch ? I don't seem to find any 

Thanks & Regards,

Mangesh Hase

Admin Reply 16, Sep 19

Hi Sir,

Stock Market Discounting & Excel are historically very risky combination but setting goals tells you a lot about the amount of Risk anyone would be ready to take.. The Index in India does 11% Returns with 20% Standard Deviation, Our Goal has to be to keep our Portfolio Beta at 1-1.2x while doing returns of 20-30%.. 


We need to take Less Portfolio level risk & we will achieve this CAGR easily if we consistently keep our heads down & have 0% emotional.. The Game is set now with the Government of India tracking markets more than us.. US Stock Market had trump where if the stock markets goes down by 10% he would tweet & calm the markets now we have the government who will come out to protect their own image if the Markets go down.. 


I am seeing massive accumulation in Midcaps & Smallcaps after Feb 2019.. Your Calculations seems correct, May the gods be kind to us, We will achieve your goals!

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